DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT CFDA SUPPORTIVE HOUSING FOR THE ELDERLY (SECTION 202)

April 2017 Supportive Housing for the Elderly HUD DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT CFDA 14.157 SUPPORTIVE HOUSING FOR THE ELDERLY (SECTION 202) I. PROGRAM OBJECTIVES The objective of Supportive Housing for the Elderly is to provide Federal capital advances and project rental assistance under Section 202 of the National Housing Act of 1959 for development of housing projects serving very low-income elderly persons. II. PROGRAM PROCEDURES Section 202 funds are awarded to private nonprofit groups (sponsors) and, in some cases, forprofit limited partnerships, provided that the sole general partner is either an otherwise qualifying nonprofit or a corporation wholly owned and controlled by the nonprofit. Only a sponsor may obtain a Section 202 capital advance fund reservation, which will be transferred to an owner entity to be organized by the sponsor after award. Capital advances (direct payments) are provided to finance the construction, rehabilitation, or acquisition (with or without rehabilitation) of structures that will serve as supportive housing for very low-income elderly persons, including the frail elderly. Operating subsidies are provided for the projects to help make them affordable. The capital advance is not required to be repaid as long as the project is available to very low income elderly for 40 years. Capital advance funds will be advanced on a monthly basis during construction for work in progress; however, projects that utilize tax credits may release the capital advance upon completion of the project. Projects are expected to start construction within 18 months of the date of the fund reservation, with limited provision for extensions. Project-based rental assistance is provided under a Project Rental Assistance Contract (PRAC) and is calculated based on operating cost standards established by HUD. The initial PRAC term is 3 years. However, subsequent contracts are renewable annually for up to a 1-year term subject to the availability of funds. This program is exempt from OMB Circular A-110 (2 CFR part 215) (24 CFR section 84.2, definition of Award, and 2 CFR section 200.40, definition of Federal financial assistance ) and 2 CFR part 200, except subpart F and 2 CFR section 200.425. Financial Reporting In accordance with HUD s Uniform Financial Reporting Standards rule, annually, an owner is required to submit a financial statement, prepared in accordance with generally accepted accounting principles (GAAP), in the electronic format specified by HUD. The unaudited financial statement is due 2 months after the owner s fiscal year end and the audited financial statement is due 9 months after its fiscal year end (24 CFR section 5.801). The financial statement must include the financial activities of this program. Compliance Supplement 4-14.157-1

April 2017 Supportive Housing for the Elderly HUD Cost Certifications Owners are required to submit one or two detailed cost certifications at the end of each project. These reports provide information on actual development cost breakdown and operating costs. The reports are HUD-92330, Mortgagor s Certificate of Actual Costs (OMB No. 2502-0112) and HUD-92330-A, Contractor s Certificate of Actual Costs (OMB No. 2502-0044). The HUD- 92330-A is only required when there is an identity of interest between the mortgagor and the general contractor and when a cost-plus contract is required in nonprofit contracts. Source of Governing Requirements This program is authorized under Section 202 of the Housing Act of 1959, as amended, (12 USC 1701q). Program regulations are in 24 CFR part 891. Availability of Other Program Information Additional information about the Section 202 program, can be found in Supportive Housing for the Elderly (HUD Handbook 4571.3), Supportive Housing for the Elderly Conditional Commitment Final (HUD Handbook 4571.5), HUD Notice H96-102, and HUD Notice 2011-18, Updated Processing Guidance for the Section 202 Supportive Housing for the Elderly and Section 811 Supportive Housing for Persons with Disabilities Programs. These are available at HUD s Client Information Policy Systems (HUDCLIPS) (http://portal.hud.gov/hudportal/hud?src=/program_offices/administration/hudclips) or from the HUD Multifamily Clearinghouse at 1-800-685-8470. III. COMPLIANCE REQUIREMENTS In developing the audit procedures to test compliance with the requirements for this Federal program, the auditor must determine, from the following summary (also included in Part 2, Matrix of Compliance Requirements ), which of the 12 types of compliance requirements apply, and then determine which of the applicable requirements is likely to have a direct and material effect on the Federal program at the auditee. For each such requirement, the auditor must use Part 3 (which includes generic details about each compliance requirement other than Special Tests and Provisions) and this program supplement (which includes any program-specific requirements) to perform the audit. Compliance Supplement 4-14.157-2

April 2017 Supportive Housing for the Elderly HUD Compliance Requirements A B C E F G H I J L M N Activities Allowed or Unallowed Allowable Costs/Cost Principles Cash Management Eligibility Equipment/ Real Property Management Matching, Level of Effort, Earmarking Period of Performance Procurement/ Suspension and Debarment Program Income Reporting Subrecipient Monitoring Special Tests and Provisions Y Y Y Y N N N Y N Y N Y A. Activities Allowed or Unallowed 1. The project shall provide the necessary services for the occupants, which may include, but not limited to, health, education, welfare, informational, recreational, homemaking, meals, counseling, and referral services (12 USC 1701q; 24 CFR sections 891.225 and 891.500). 2. PRAC project funds may be used only for expenses that are reasonable and necessary to the operation of the project as provided for in the Regulatory Agreement between HUD and the project owner. 3. Project facilities may not include infirmaries, nursing stations, or spaces for overnight care (24 CFR section 891.220). 4. Project must be modest in design. In supportive housing for the elderly, amenities not eligible for HUD funding in individual units include balconies and decks, atriums, bowling alleys, swimming pools, saunas, jacuzzis, trash compactors, washers and dryers. Sponsors may include certain excess amenities but must pay for them from sources other than Section 202 capital advance funds. They must also pay for the continuing operating costs associated with any excess amenities from sources other than the Section 202 project rental assistance contract (24 CFR section 891.120). Compliance Supplement 4-14.157-3

April 2017 Supportive Housing for the Elderly HUD E. Eligibility 1. Eligibility for Individuals Section 202 (CFDA 14.157) of the Housing Act of 1959 provides housing for the elderly. To qualify as elderly, one or more members of the household must be 62 years of age or more at the time of initial occupancy. Residents must also qualify as very low-income households to be eligible (24 CFR section 891.205). The owner is responsible for annually reexamining incomes of households occupying assisted units and making appropriate adjustments to the tenant payment and the project rental assistance payment (24 CFR section 891.410). Assistance applicants shall submit signed consent forms upon initial application and at reexamination (24 CFR section 5.230). 2. Eligibility of Group of Individuals or Area of Service Delivery Not Applicable 3. Eligibility for Subrecipients Not Applicable L. Reporting 1. Financial Reporting a. SF-270, Request for Advance or Reimbursement Not Applicable b. SF-271, Outlay Report and Request for Reimbursement for Construction Programs Not Applicable c. SF-425, Federal Financial Report Not Applicable 2. Performance Reporting HUD 60002, Section 3 Summary Report, Economic Opportunities for Low- and Very Low-Income Persons (OMB No. 2529-0043) Each recipient that administers covered public and Indian housing assistance, regardless of the amount expended, and each recipient that administers covered housing and community development assistance in excess of $200,000 in a program year, must submit HUD 60002 information using the automated Section 3 Performance Evaluation and Registry (SPEARS) System (24 CFR sections 135.3(a)(1) and 135.90). Information on the automated system is available at http://portal.hud.gov/hudportal/hud?src=/program_offices/fair_housing_equal_o pp/section3/section3/spears. The system was launched on August 24, 2015. The due date for submission of 2013 and 2014 reports was extended to December 15, 2015. SPEARS pre-populates Form HUD 60002 with recipient name and address along with disbursement data for program funding covered by Section 3. Users Compliance Supplement 4-14.157-4

April 2017 Supportive Housing for the Elderly HUD have the flexibility of selecting the 12-month reporting period, typically to coincide with their respective fiscal cycle. Key Line Items The following line items contain critical information: a. Number of new hires that meet the definition of a Section 3 resident b. Total dollar amount of construction contracts awarded during the reporting period c. Dollar amount of construction contracts awarded to Section 3 businesses during the reporting period d. Number of Section 3 businesses receiving the construction contracts in c above e. Total dollar amount of non-construction contracts awarded during the reporting period f. Dollar amount of non-construction contracts awarded to Section 3 businesses during the reporting period g. Number of Section 3 businesses receiving the non-construction contracts in f above 3. Special Reporting Not Applicable N. Special Tests and Provisions 1. Wage Rate Requirements Compliance Requirement - All laborers and mechanics (other than volunteers under the conditions set out in 24 CFR part 70) employed by contractors and subcontractors in the construction (including rehabilitation) of housing with 12 or more units assisted under this program shall be paid wages at rates not less than those prevailing in the locality, as determined by the Secretary of Labor in accordance with the Wage Rate Requirements. A group home for persons with disabilities is not covered by these labor standards (24 CFR section 891.155(d)). See Wage Rate Requirements Cross-Cutting Section (page 4-20.001-1). 2. Use of Project Funds Compliance Requirement Owners are required to establish and maintain a separate project account in federally insured depository. All rents, charges, income, and revenues arising from the project operation shall be deposited into this account. Project funds must be used for the operation of the project (including required insurance coverage), to make required principal and interest payments on the Section 202 loan, and to make required Compliance Supplement 4-14.157-5

April 2017 Supportive Housing for the Elderly HUD deposits to replacement reserve and the residual receipts accounts (24 CFR sections 891.400(e) and 891.600(e)). Audit Objectives Determine whether the project fund was properly established, required deposits were made into this fund, and disbursements were only for allowed purposes. Suggested Audit Procedures a. Ascertain if the project funds receipts account has been established in a federally insured depository. b. Perform tests to ascertain if all rents, charges, income, and revenues arising from the project operation were deposited into the fund. c. Test a sample of disbursements from the fund ascertain if they were used only for the operation of the project or to make required deposits to the replacement reserve or the residual receipts account. 3. Replacement Reserve Compliance Requirement Owners shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally insured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund (Regulatory Agreement, item 5 A). All disbursements from the reserve must be approved by HUD (24 CFR sections 891.405 and 891.605). Audit Objectives Determine whether the replacement reserve was properly established, required monthly deposits were made, and disbursements were only for HUD approved purposes. Suggested Audit Procedures a. Ascertain if a replacement reserve account has been established in a federally insured depository in an interest-bearing account. b. Ascertain if the required monthly deposits have been made to the replacement reserve account. c. Ascertain if interest earnings from the reserve were retained in the replacement reserve account. d. Test a sample of disbursements from the replacement reserve account and ascertain if they were approved by HUD and were made for the approved purpose. Compliance Supplement 4-14.157-6

April 2017 Supportive Housing for the Elderly HUD 4. Residual Receipts Account Compliance Requirement Any funds in the project funds account (including earned interest) at the end of the fiscal year shall be deposited in a federally insured account within 60 days following the end of the fiscal year. Withdrawals from this account may be made only for project purposes and with the approval of HUD (24 CFR sections 891.400(e) and 891.600(e)). Audit Objectives Determine whether the residual receipts account was properly established, the required deposit was made within 60 days following year-end, and disbursements were only for project purposes and the approval of HUD. Suggested Audit Procedures a. Ascertain if residual receipts account has been established in a federally insured depository. b. Ascertain if the required annual deposit was made within 60 days following yearend. c. Test a sample of disbursements from the residual receipts account and ascertain if they were used for project purposes and approved by HUD. IV. OTHER INFORMATION To protect its interest in a capital advance, HUD requires a note and mortgage for a 40-year term. The owner is not required to repay the principal or pay interest and the note is forgiven at maturity, as long as the owner provides housing for the designated class of people in accordance with applicable HUD requirements. However, the full outstanding balance on the note should be considered Federal awards expended, included in determining Type A programs, and reported as loans on the Schedule of Expenditures of Federal Awards or accompanying notes in accordance with 2 CFR part 200, subpart F. Compliance Supplement 4-14.157-7

April 2017 Housing Counseling Assistance Program HUD DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT CFDA 14.169 HOUSING COUNSELING ASSISTANCE PROGRAM I. PROGRAM OBJECTIVES The objective of the Housing Counseling Assistance Program is to provide counseling and advice to tenants and homeowners, both current and prospective, with respect to property maintenance, financial management/literacy, and such other matters as may be appropriate to assist them in improving their housing conditions, meeting their financial needs, and fulfilling the responsibilities of tenancy and homeownership. II. PROGRAM PROCEDURES Funding provided by this program is intended to support Department of Housing and Urban Development (HUD)-approved housing counseling agencies ability to respond flexibly to the needs of residents and neighborhoods, and deliver a wide variety of housing counseling services to homebuyers, homeowners, renters, and the homeless. The program operates through a nationwide network of over 2,300 HUD-approved housing counseling agencies located in urban, suburban, and rural communities in all 50 States. In 2012, HUD established the Office of Housing Counseling, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Pub. L. No. 111-203), which specified the functions of the new office. The Office of Housing Counseling administers the Housing Counseling Assistance Program, which is awarded annually on a competitive basis through a Notice of Funding Availability (NOFA). The program plays an integral role in the continued stabilization of our nation s housing market by helping individuals and families attain housing and stay in their homes through responsible homeownership or affordable rental housing. Traditionally underserved populations, such as minorities, the elderly, veterans, persons with disabilities, persons with limited English proficiency, and residents of rural areas, face additional housing and economic challenges. HUD s Housing Counseling Assistance Program funds housing counselors who provide expert, unbiased guidance and information to help families and individuals meet their housing needs and improve their financial situations. Moreover, HUD grants assist housing counselors to act as an important safeguard against scams and discrimination, and to act as a gateway to local, State, Federal and private housing assistance. This program has two distinct components: (1) HUD-approval, and (2) housing counseling grants. To participate in the program, organizations must first be approved by HUD as housing counseling agencies. Approval entails meeting various requirements relating to experience and capacity. Currently there are 2,315 active agencies participating in the program. Approximately 908 approved local housing counseling agencies (LHCAs), which have 696 branch offices. Additionally, there are 34 HUD-approved national and regional intermediaries with approximately 380 subgrantees, 77 branch subgrantees, 72 affiliates, and 58 branches. There are 25 State housing finance agencies (SHFAs) which have 8 branches, and 8 Multi-State Organizations (MSOs) which have 49 branches. Approved agencies use HUD s approval to receive referrals and market their services. Approved agencies are provided training (depending on available resources), and are eligible to apply for a housing counseling grant. The application Compliance Supplement 4-14.169-1

April 2017 Housing Counseling Assistance Program HUD and approval process to become a HUD-approved agency is provided on HUD s website at https://www.hudexchange.info/programs/housing-counseling/. Additionally, when funds are available, HUD issues a yearly Notice of Funding Availability (NOFA) published on Grants.gov, under which there is a competition for housing counseling grants. The Housing Counseling Assistance Program provides funds to HUD-approved LHCAs; HUD-approved national and regional intermediaries; and State Housing Finance Agencies (SHFAs). LHCAs are funded directly by HUD to provide services within their communities. Intermediaries and SHFAs manage the use of HUD housing counseling funds by subgrantees, including local affiliates and branches. Source of Governing Requirements HUD's Housing Counseling Assistance Program is authorized by Section 106 of the Housing and Urban Development Act of 1968 (12 USC 1701x). Program regulations are in 24 CFR part 214. Availability of Other Program Information Pertinent information regarding the Housing Counseling Assistance Program is available on HUD s website at https://www.hudexchange.info/programs/housing-counseling/. III. COMPLIANCE REQUIREMENTS In developing the audit procedures to test compliance with the requirements for this Federal program, the auditor must determine, from the following summary (also included in Part 2, Matrix of Compliance Requirements ), which of the 12 types of compliance requirements apply, and then determine which of the applicable requirements is likely to have a direct and material effect on the Federal program at the auditee. For each such requirement, the auditor must use Part 3 (which includes generic details about each compliance requirement other than Special Tests and Provisions) and this program supplement (which includes any program-specific requirements) to perform the audit. Compliance Supplement 4-14.169-2

April 2017 Housing Counseling Assistance Program HUD Compliance Requirements A B C E F G H I J L M N Activities Allowed or Unallowed Allowable Costs/Cost Principles Cash Management Eligibility Equipment/ Real Property Management Matching, Level of Effort, Earmarking Period of Performance Procurement/ Suspension and Debarment Program Income Reporting Subrecipient Monitoring Special Tests and Provisions Y Y Y N N N Y Y Y Y Y N A. Activities Allowed or Unallowed Housing Counseling NOFAs contain detailed information regarding the activities for which grantees and sub-grantees can be reimbursed. Section 106 of the Housing and Urban Development Act of 1968 (12 USC 1701x) also addresses allowable and unallowable activities. Only the following activities generally are allowed under the statute: 1. Individual counseling or group education or classes regarding: a. Pre-purchase/home buying; b. Resolving or preventing mortgage delinquency or default; c. Non-delinquency post-purchase; d. Locating, securing, or maintaining residence in rental housing; and e. Shelter or services for the homeless. 2. Home equity conversion mortgage counseling. 3. Marketing and outreach initiatives. 4. Training. 5. Computer equipment/systems. 6. Administrative costs/network management. Compliance Supplement 4-14.169-3

April 2017 Housing Counseling Assistance Program HUD 7. Mortgage modification scam identification and reporting. 8. Education in such areas as fair housing and renters rights. J. Program Income The auditor should be alert to the fact that, in the performance of the award, the recipient may be reimbursed directly or indirectly from other sources for services provided. This reimbursement generally should be treated as program income using the deduction method. Recipients may include in their vouchers only that portion of its services for which it does not receive reimbursement from any other funding source. L. Reporting 1. Financial Reporting a. SF-270, Request for Advance or Reimbursement Not Applicable b. SF-271, Outlay Report and Request for Reimbursement for Construction Programs Not Applicable c. SF-425, Federal Financial Report Applicable 2. Performance Reporting Not Applicable 3. Special Reporting Not Applicable Compliance Supplement 4-14.169-4

April 2017 Supportive Housing for Persons with Disabilities HUD DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT CFDA 14.181 SUPPORTIVE HOUSING FOR PERSONS WITH DISABILITIES (SECTION 811) I. PROGRAM OBJECTIVES The objective of Supportive Housing for Persons with Disabilities is to expand the supply of supportive housing for very low-income persons with disabilities through (1) providing Federal capital advances under Section 811 of the Cranston-Gonzalez National Affordable Housing Act (Act) for development of housing projects serving persons with disabilities; and (2) providing rental assistance to very low-income (within 50 percent of the median income for the area) persons with disabilities residing in projects financed by the Act. II. PROGRAM PROCEDURES Capital advances (direct payments) may be used to construct, rehabilitate, or acquire structures to be used as supportive housing for persons with disabilities. HUD holds a non-amortizing mortgage on the property under the terms of the capital advance. No repayment is required, as long as the owner complies with the Regulatory Agreement with HUD to make available rental housing to very low-income persons with disabilities for at least 40 years (24 CFR section 891.170). Failure to comply with the terms of the capital advance and HUD s statutory and regulatory requirements may result in foreclosure under the mortgage. Project rental assistance is used to cover the difference between the HUD-approved operating costs of the project and the tenants contributions toward rent (24 CFR section 891.410). Project rental assistance is provided under a Project Rental Assistance Contract (PRAC) and is calculated based on operating cost standards established by HUD (24 CFR section 891.150). The owner submits monthly vouchers to HUD for payment of rental assistance. The total amount of assistance equals total HUD-approved operating expenses for the project minus the tenant payments received for all units (PRAC paragraph 2.4(f)(1)). Tenants generally are required to pay rent in accordance with a Housing Assistance Payment Contract. The owner receives assistance from HUD on vacant rental assistance units at a rate of 50 percent of Operating Expense for a unit under PRAC (PRAC paragraph 2.4(b)) for the first 60 days of vacancy, given certain conditions are met (24 CFR section 891.445). This program is exempt from OMB Circular A-110 (24 CFR 84.2, definition of Award, and 2 CFR section 200.40, definition of Federal financial assistance ) and 2 CFR part 200, except subpart F and 2 CFR section 200.425. Financial Reporting In accordance with HUD s Uniform Financial Reporting Standards rule, annually, an owner is required to submit a financial statement, prepared in accordance with generally accepted accounting principles (GAAP), in the electronic format specified by HUD. The unaudited financial statement is due 2 months after the owner's fiscal year end and an audited financial statement is due 9 months after its fiscal year end (24 CFR section 5.801). The financial statement must include the financial activities of this program. Compliance Supplement 4-14.181-1

April 2017 Supportive Housing for Persons with Disabilities HUD Cost Certifications Owners are required to submit one or two detailed cost certifications at the end of each project. These reports provide information on actual development cost breakdown and operating costs. The reports are HUD-92330, Mortgagor s Certificate of Actual Costs (OMB No. 2502-0112) and HUD-92330-A, Contractor s Certificate of Actual Costs (OMB No. 2502-0044). The HUD- 92330-A is only required when there is an identity of interest between the mortgagor and the general contractor and when a cost-plus-contract is required in nonprofit contracts. Source of Governing Requirements This program is authorized under Section 811 of the Cranston-Gonzalez National Affordable Housing Act of 1990 (42 USC 8013). Implementing regulations for this program are 24 CFR part 5, subpart H, and part 891, subparts A, C, and D. III. COMPLIANCE REQUIREMENTS In developing the audit procedures to test compliance with the requirements for this Federal program, the auditor must determine, from the following summary (also included in Part 2, Matrix of Compliance Requirements ), which of the 12 types of compliance requirements apply, and then determine which of the applicable requirements is likely to have a direct and material effect on the Federal program at the auditee. For each such requirement, the auditor must use Part 3 (which includes generic details about each compliance requirement other than Special Tests and Provisions) and this program supplement (which includes any program-specific requirements) to perform the audit. Compliance Requirements A B C E F G H I J L M N Activities Allowed or Unallowed Allowable Costs/Cost Principles Cash Management Eligibility Equipment/ Real Property Management Matching, Level of Effort, Earmarking Period of Performance Procurement/ Suspension and Debarment Program Income Reporting Subrecipient Monitoring Special Tests and Provisions Y Y Y Y N N N Y N Y N Y Compliance Supplement 4-14.181-2

April 2017 Supportive Housing for Persons with Disabilities HUD A. Activities Allowed or Unallowed 1. PRAC project funds must be used only for expenses that are reasonable and necessary to the operation of the project as provided for in the Regulatory Agreement between HUD and the project owner (24 CFR section 891.400(e)). 2. Project facilities may not include infirmaries, nursing stations, spaces dedicated to the delivery of medical treatment or physical therapy, padded rooms, or space for respite care or sheltered workshops, even if paid for from sources other than the HUD capital advance. Except for office space used by the owner exclusively for the administration of the project, project facilities may not include office space (24 CFR section 891.315). 3. Project must be modest in design. In independent living facilities for persons with disabilities, amenities not eligible for HUD funding in individual units include balconies and decks, atriums, bowling alleys, swimming pools, saunas, jacuzzis, trash compactors, washers and dryers. However, HUD funding is eligible to pay for washers and dryers in group homes for persons with disabilities. Sponsors may include excess amenities, but must pay for them from sources other than Section 811 capital advance funds. They must also pay for the continuing operating costs associated with any excess amenities from sources other than the Section 811 PRAC (24 CFR section 891.120). E. Eligibility 1. Eligibility for Individuals Section 811 of the National Affordable Housing Act provides funding for housing for persons with disabilities. To qualify as disabled, the household must consist of at least one person who is an adult (18 years or older) with a disability, two or more persons with disabilities living together, or a surviving household member under certain circumstances (42 USC 1437a(b)(3); 24 CFR section 891.505). Residents must also qualify as very low-income households to be eligible (42 USC 8013). The owner is responsible for annually reexamining incomes of households occupying assisted units and make appropriate adjustments to the tenant payment and the project rental assistance payment (24 CFR section 891.410). Assistance applicants shall submit signed consent forms upon initial application and at reexamination (24 CFR section 5.230). 2. Eligibility for Group of Individuals or Area of Service Delivery Not Applicable 3. Eligibility for Subrecipients Not Applicable Compliance Supplement 4-14.181-3

April 2017 Supportive Housing for Persons with Disabilities HUD L. Reporting 1. Financial Reporting a. SF-270, Request for Advance or Reimbursement Not Applicable b. SF-271, Outlay Report and Request for Reimbursement for Construction Programs Not Applicable c. SF-425, Federal Financial Report Not Applicable 2. Performance Reporting HUD 60002, Section 3 Summary Report, Economic Opportunities for Low- and Very Low-Income Persons (OMB No. 2529-0043) Each recipient that administers covered public and Indian housing assistance, regardless of the amount expended, and each recipient that administers covered housing and community development assistance in excess of $200,000 in a program year, must submit HUD 60002 information using the automated Section 3 Performance Evaluation and Registry (SPEARS) System (24 CFR sections 135.3(a)(1) and 135.90). Information on the automated system is available at http://portal.hud.gov/hudportal/hud?src=/program_offices/fair_housing_equal_o pp/section3/section3/spears. The system was launched on August 24, 2015. The due date for submission of 2013 and 2014 reports was extended to December 15, 2015. SPEARS pre-populates Form HUD 60002 with recipient name and address along with disbursement data for program funding covered by Section 3. Users have the flexibility of selecting the 12-month reporting period, typically to coincide with their respective fiscal cycle. Key Line Items The following line items contain critical information: a. Number of new hires that meet the definition of a Section 3 resident b. Total dollar amount of construction contracts awarded during the reporting period c. Dollar amount of construction contracts awarded to Section 3 businesses during the reporting period d. Number of Section 3 businesses receiving the construction contracts e. Total dollar amount of non-construction contracts awarded during the reporting period f. Dollar amount of non-construction contracts awarded to Section 3 businesses during the reporting period Compliance Supplement 4-14.181-4

April 2017 Supportive Housing for Persons with Disabilities HUD g. Number of Section 3 businesses receiving the non-construction contracts. 3. Special Reporting Not Applicable N. Special Tests and Provisions 1. Wage Rate Requirements Compliance Requirement All laborers and mechanics (other than volunteers under the conditions set out in 24 CFR part 70) employed by contractors and subcontractors in the construction (including rehabilitation) of housing with 12 or more units assisted under this program shall be paid wages at rates not less than those prevailing in the locality, as determined by the Secretary of Labor in accordance with the Wage Rate Requirements. A group home for persons with disabilities is not covered by these labor standards (24 CFR section 891.155(d)). See Wage Rate Requirements Cross-Cutting Section (page 4-20.001-1). 2. Use of Project Funds Compliance Requirement - Owners are required to establish and maintain a separate project account in federally insured depository. All rents, charges, income, and revenues arising from the project operation shall be deposited into this account. Project funds must be used for the operation of the project (including required insurance coverage), and to make required deposits to replacement reserve and the residual receipts accounts (24 CFR section 891.400(e)). Audit Objectives Determine whether the project fund was properly established, required deposits were made into this fund, and disbursements were only for allowed purposes. Suggested Audit Procedures a. Ascertain if the project funds receipts account has been established in a federally insured depository. b. Perform tests to ascertain if rents, charges, income, and revenues arising from the project operation were deposited into the fund. c. Test a sample of disbursements from the fund to ascertain if they were used only for the operation of the project or to make required deposits to the replacement reserve or the residual receipts account. Compliance Supplement 4-14.181-5

April 2017 Supportive Housing for Persons with Disabilities HUD 3. Replacement Reserve Compliance Requirement Owners shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally insured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund (Regulatory Agreement, item 5 (a)). All disbursements from the reserve must be approved by HUD (24 CFR section 891.405). Audit Objectives Determine whether the replacement reserve was properly established, required monthly deposits were made, and disbursements were only for HUD-approved purposes. Suggested Audit Procedures a. Ascertain if a replacement reserve account has been established in a federally insured depository in an interest-bearing account. b. Ascertain if the required monthly deposits have been made to the replacement reserve account. c. Ascertain if interest earnings from the reserve were retained in the replacement reserve account. d. Test a sample of disbursements from the replacement reserve account and ascertain if they were approved by HUD and were made for the approved purpose. 4. Residual Receipts Account Compliance Requirement Any funds in the project funds account (including earned interest) at the end of the fiscal year shall be deposited in a federally insured account within 60 days following the end of the fiscal year. Withdrawals from this account may be made only for project purposes and with the approval of HUD (24 CFR section 891.400(e)). Audit Objectives Determine whether the residual receipts account was properly established, the required deposit was made within 60 days following year-end, and disbursements were only for project purposes and the approval of HUD. Suggested Audit Procedures a. Ascertain if residual receipts account has been established in a federally insured depository. b. Ascertain if the required annual deposit was made within 60 days following yearend. Compliance Supplement 4-14.181-6

April 2017 Supportive Housing for Persons with Disabilities HUD c. Test a sample of disbursements from the residual receipts account and ascertain if they were used for project purposes and approved by HUD. IV. OTHER INFORMATION To protect its interest in a capital advance, HUD requires a note and mortgage, for a 40-year term. The owner is not required to repay the principal or pay interest and the note is forgiven at maturity, as long as the owner provides housing for the designated class of people in accordance with applicable HUD requirements. However, the full outstanding balance on the note should be considered Federal awards expended, included in determining Type A programs and reported as loans on the Schedule of Expenditures of Federal Awards or accompanying notes in accordance with 2 CFR part 200, subpart F. Compliance Supplement 4-14.181-7

April 2017 Section 8 Project-Based Cluster HUD CFDA 14.182 CFDA 14.195 CFDA 14.249 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT SECTION 8 NEW CONSTRUCTION AND SUBSTANTIAL REHABILITATION SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM SECTION 8 MODERATE REHABILITATION SINGLE ROOM OCCUPANCY CFDA 14.856 LOWER INCOME HOUSING ASSISTANCE PROGRAM--SECTION 8 MODERATE REHABILITATION I. PROGRAM OBJECTIVES The objective of the Section 8 project-based rental assistance programs is to aid low- and very low-income families in obtaining decent, safe, and sanitary rental housing through the provision of housing assistance payments to participating owners on behalf of eligible tenants. II. PROGRAM PROCEDURES Housing assistance payments are used to make up the difference between the approved rent due to the owner for the dwelling unit and the occupant family s required contribution toward rent. Assisted families must pay the highest of: (a) 30 percent of their monthly adjusted family income, (b) 10 percent of gross family income, or (c) the portion of welfare assistance designated for housing toward rent. This program is no longer funding new applications and awards. Under these project-based programs, the rental subsidy is tied to a specific unit; when a family moves from the unit, it has no right to continued assistance (unless the owner opts out of the Section 8 contract, in which case the individual is entitled to enhanced vouchers). The projectbased Section 8 Housing Assistance Payments (HAP) contracts are administered by the Department of Housing and Urban Development (HUD) or State, local, or other governmental entities or instrumentalities thereof qualifying as Public Housing Agencies (PHAs). Where a PHA is the contract administrator, HUD enters into annual contributions contracts with PHAs which enter into HAP contracts with private owners. Contract Administrators are required to maintain a HAP contract register or similar record in which to record the PHA s obligation for monthly housing assistance payments. This record shall provide information as to: the name and address of the family; the name and address of the owner; dwelling unit size; the effective and expiration dates of the lease; the monthly contract rent payable to the owner; monthly rent payable by the family; and the monthly housing assistance payment. The record shall also provide data as to the date the family vacates and the number of days the unit is vacant, if any. This requirement is applicable to PHAs that are administering Housing Assistance Payments Program Projects pursuant to the provisions of Annual Contributions Contracts. It is not applicable to Section 8 projects on which HUD has executed a HAP contract directly with an owner or PHA. Compliance Supplement 4-14.182-1

April 2017 Section 8 Project-Based Cluster HUD The Moderate Rehabilitation (Mod Rehab) program (including the Single Room Occupancy (SRO) program for homeless individuals) assists low income families in affording decent, safe and sanitary housing by encouraging property owners to rehabilitate substandard housing and lease the units with rental subsidies to low income families. The PHA and the owner execute an Agreement to Enter into Housing Assistance Payments Contract under which the owner agrees to rehabilitate the unit to be subsidized and the PHA agrees to subsidize the units upon satisfactory completion of rehabilitation. Upon completion of the rehabilitation, the PHA and the owner execute a HAP contract. The PHA refers interested eligible families on its Section 8 waiting list to the owner to fill vacancies in moderate rehabilitation units. Mod Rehab program assistance is considered a project-based subsidy because the assistance is tied to specific units under an assistance contract with the owner for a specified term. A family that moves from a unit with project-based assistance does not have any right to continued assistance, except in the case of certain housing conversion actions, such as when the owner chooses to opt out of the Section 8 program. In such cases, tenants are entitled to enhanced vouchers. Under the Mod Rehab SRO program, eligible applicants are PHAs or non-profit organizations, which must contract with a PHA to administer the rental assistance. Eligible individuals must be homeless according to HUD s definition and may be located through owner outreach as well as from the PHA waiting list (24 CFR section 882.808). No single project may contain more than 100 assisted units. The SRO program is administered under an initial 10-year HAP term, with the possibility of subsequent one-year renewals. The program is administered at HUD Headquarters by the Office of Community Planning and Development (CPD). In accordance with HUD s Uniform Financial Reporting Standards rule, annually, a PHA is required to submit its financial statement, prepared in accordance with generally accepted accounting principles (GAAP), in the electronic format specified by HUD. The unaudited financial statement is due 2 months after the PHA s fiscal year end and the audited financial statement is due 9 months after its fiscal year end (24 CFR section 5.801). The financial statement must include the financial activities of the programs in this cluster. The US Housing Act of 1937 requires that assistance contracts signed by owners participating in the Section 8 housing assistance payments programs provide for annual adjustment in the monthly rentals for units covered by the original Section 8 HAP contract. Each year there are revised Annual Adjustment Factors (AAF) for adjustment of contract rents on assistance contract anniversaries, which are applied for those calendar months commencing after the effective date of the annual notice of the change in monthly rental. The AAF are based on a formula using data on residential rent and utilities cost changes from the most current annual Bureau of Labor Statistics Consumer Price Index survey. For projects for which the original Section 8 HAP contract has been renewed under the Multifamily Assisted Housing Reform and Affordability Act of 1997, Pub. L. No. 105-65, 111 Stat. 1384 (MAHRA), rent adjustments are governed by MAHRA rather than by the AAF. Technical details and requirements related to AAF are described in HUD notices H 2002-10 (Section 8 Project-Based Rent Adjustments Using the Annual Adjustment Factor (AAF)), PIH 97-57 (Operating Cost Adjustment Factors (OCAF)), and the Section 8 Renewal Guide. Compliance Supplement 4-14.182-2

April 2017 Section 8 Project-Based Cluster HUD Source of Governing Requirements These programs (other than the Mod Rehab SRO program) are authorized by the US Housing Act of 1937, as amended (42 USC 1437a, c, and f; 42 USC 3535(d); 42 USC 12701; and 42 USC 13611 through 13619). Implementing regulations for post-1980 Section 8 contracts are 24 CFR parts 880 through 883, for Section 515 Rural Rental Housing Section 8 contracts are 24 CFR part 884, and for Loan Management Set-Aside contracts are 24 CFR part 886. The Moderate Rehabilitation SRO program is authorized under Section 441 of the McKinney-Vento Homeless Assistance Act, 42 USC 11401, and is subject to program regulations at 24 CFR part 882, subpart H. Availability of Other Program Information HUD maintains a page on its website at http://portal.hud.gov/hudportal/hud?src=/program_offices/housing/mfh/mfhsec8 that provides general information about these programs. HUD notices are available at http://portal.hud.gov/hudportal/hud?src=/program_offices/administration/hudclips. III. COMPLIANCE REQUIREMENTS In developing the audit procedures to test compliance with the requirements for this Federal program, the auditor must determine, from the following summary (also included in Part 2, Matrix of Compliance Requirements ), which of the 12 types of compliance requirements apply, and then determine which of the applicable requirements is likely to have a direct and material effect on the Federal program at the auditee. For each such requirement, the auditor must use Part 3 (which includes generic details about each compliance requirement other than Special Tests and Provisions) and this program supplement (which includes any program-specific requirements) to perform the audit. Compliance Requirements A B C E F G H I J L M N Activities Allowed or Unallowed Allowable Costs/Cost Principles Cash Management Eligibility Equipment/ Real Property Management Matching, Level of Effort, Earmarking Period of Performance Procurement/ Suspension and Debarment Program Income Reporting Subrecipient Monitoring Special Tests and Provisions N N Y Y N N N N N Y N Y Compliance Supplement 4-14.182-3

April 2017 Section 8 Project-Based Cluster HUD E. Eligibility 1. Eligibility for Individuals The PHA or owner, as applicable, must: a. Verify the eligibility of applicants by (a) obtaining signed applications that contain the information needed to determine eligibility (including designation as elderly, disabled, or homeless, if applicable), income, rent, and order of selection; (b) conducting verifications of family income and other pertinent information (such as assets, full time student and immigration status, and unusual medical expenses) through third parties; (c) documenting inspections and tenant certifications, as appropriate; and, (d) determining that tenant income did not exceed the maximum limit set by HUD for the PHA s jurisdiction, as shown in HUD s published notice transmitting the Limits for Low-Income and Very Low-Income Families Under the Housing Act of 1937. For the Mod Rehab SRO program, eligible individuals must be homeless upon entry into the program. (24 CFR sections 880.603, 881.601, 882.514, 882.808, 833.701, 884.214, 886.119, and 886.318) b. Determine the total tenant rent payment in accordance with 24 CFR section 5.613. c. Select participants from the waiting list in accordance with the admission policies in its administrative plan and maintain documentation which shows that, at the time of admission, the family actually met the preference criteria that determined the family s place on the waiting list. For the Mod Rehab SRO program, eligible individuals may be referred to the PHA for eligibility determination as a result of the owner s/sponsor s outreach or through the PHA waiting list. (24 CFR sections 880.603, 881.601, 882.514, 882.808(b)(2), 883.701, 884.214, and 886 subparts A and C) d. Reexamine family income and composition at least once every 12 months and adjust the total rent payment and housing assistance payment, as necessary (24 CFR sections 5.617, 880.603, 881.601, 882.515, 884.218, 886.124, and 886.324). 2. Eligibility for Group of Individuals or Area of Service Delivery Not Applicable 3. Eligibility for Subrecipients Not Applicable Compliance Supplement 4-14.182-4

April 2017 Section 8 Project-Based Cluster HUD L. Reporting 1. Financial Reporting a. SF-270, Request for Advance or Reimbursement Not Applicable b. SF-271, Outlay Report and Request for Reimbursement for Construction Programs Not Applicable c. SF-425, Federal Financial Report Not Applicable d. In lieu of the standard reports, the following reports are required on Section 8 project-based programs involving PHA/private-owners and HUD/PHA owners. (1) HUD-52663, Requisition for Partial Payment of Annual Contributions (OMB No. 2577-0169) submitted quarterly. (2) HUD-52681, Voucher for Payment of Annual Contributions and Operating Statement (OMB No. 2577-0169) submitted annually. 2. Performance Reporting Not Applicable 3. Special Reporting a. HUD-50058, Family Report (OMB No.2577-0083) The PHA is required to submit this form electronically to HUD each time the PHA completes an admission, annual reexamination, interim reexamination, portability move-in, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA s jurisdiction under portability. Key Line Items The following line items contain critical information: (1) Line 2a Type of Action (2) Line 2b Effective Date of Action (3) Line 3b, 3c Names (4) Line 3e Date of Birth (5) Line 3n Social Security Numbers (6) Line 5a Unit Address (7) Line 5h, 5i Unit Inspection Dates (8) Line 7i Total Annual Income Compliance Supplement 4-14.182-5

April 2017 Section 8 Project-Based Cluster HUD (9) Line 13h Contract Rent to Owner (10) Line 13k or 13x Tenant rent b. HUD-50059, Owner s Certification of Compliance With HUD s Tenant Eligibility and Rent Procedures (OMB No. 2502-0204) This report is submitted electronically to HUD. N. Special Tests and Provisions 1. Contract Rent Adjustments Compliance Requirement The PHA or owner applies or ensures annual adjustments to contract rents are applied. The HAP contract specifies the method to be used to determine rent adjustments. Adjustments must not result in material differences between rents charged for assisted units and comparable unassisted units except as those differences existed at contract execution. Special adjustments to contract rents, within the original contract term, may also be made to the extent deemed necessary by the PHA or HUD (24 CFR sections 880.609, 881.601, 882.410, 882.808(e), 883.701, 884.109, 886.112, and 886.312). Audit Objective Determine whether contract rents are being adjusted properly. Suggested Audit Procedures a. Review the procedures for applying annual adjustment factors and handling special adjustment requests. b. Select a sample of contracts and the related files with annual and special rent adjustments and test the supporting data and certifications that were submitted to support the adjustments. c. Review the selected HAP contract files or tenant files to verify that annual and special adjustments were applied correctly and that rent adjustments did not result in material differences between the rents charged for assisted and comparable unassisted units. 2. Tenant Utility Allowances Compliance Requirement The PHA or owner must (a) establish or ensure tenant utility allowances based on utility consumption and rate data for various sized units, structure types, and fuel types, (b) make an annual review of tenant utility allowances to determine their reasonableness, and (c) adjust the allowances, when appropriate (24 CFR sections 5.603, 880.610, 881.601, 882.510, 882.808(k), 883.701, 884.220, 886.126, and 886.326). Audit Objective Determine whether tenant utility allowances are properly established. Compliance Supplement 4-14.182-6